The issuance of asset-backed securities (ABS) in South Korea shrank in the third quarter as a surge in credit finance firms' ABS issuance was offset by a reduction in mortgage-backed securities (MBS), the financial watchdog said Thursday.
ABS sales reached 6.53 trillion won (5.71 billion U.S. dollars) during the July-September period, down 5.6 percent from a year earlier, according to the Financial Supervisory Service (FSS).
Issuance by credit finance firms such as credit card companies soared 211.1 percent on-year to 2.95 trillion won in the third quarter as the firms, which offer credit without deposits, sold huge ABS overseas in a bid to refinance ABS that matures in the near future.
Huge issuance by Hana-SK Card also boosted sales of ABS by credit finance firms, according to the FSS. Hana-SK Card floated 995 billion won in ABS during the third quarter after securing handset installment sales receivables handed over by SK Telecom as collateral.
However, MBS sales by the Korea Housing Finance Corp. (KHFC) contracted 33 percent on-year to 1.84 trillion won in the three months ended Sept. 30, contributing to lower ABS sales over the cited period. The KHFC issued more than one trillion won in MBS with mortgage loans handed over by local banks as collateral in the third quarter of last year, but such transactions did not happen this year, the FSS said.
Issuance of primary-collateralized bond obligations (P-CBOs) grew 11 percent on-year to 394.5 billion won in the third quarter, according to the FSS. P-CBO is a type of ABS that is issued via special purpose company (SPC) by securitizing corporate bonds, including bank bonds, handed over by securities firms.
Financial firms and mortgage lenders in South Korea use cash flows from credit card receivables, mortgage loans, loan receivables and sales credit as underlying asset to issue ABS.